Here’s Why Warren Buffett Keeps Buying Wells Fargo

To start this off right, I’d like to point out that Warren Buffett is extremely optimistic about the future of America. “Tomorrow’s always uncertain,” he mentions while on CNBC this morning. “But the future, the longer future, is always very certain. And that’s what you have to keep your eye on.”

It’s this very attitude that allows Mister Buffett to continue building astronomical stakes in businesses that he feels are worthy through the best of times and the worst of times. But how does Warren Buffett choose these particular companies to begin with? Let’s look at Wells Fargo, and find the evidence in this stock which he continues purchasing the most.

Wells Fargo
Wells Fargo has entered into Warren Buffett’s portfolio way back in the 1990s, and it is a great representation of his philosophy of long term investing. Plus, you can see a steady trend of continual buying of this stock since the first quarter of 2009. From that point until the present day, Berkshire Hathaway has bought 1 million 119,940,333 shares of Wells Fargo. This has brought the total position up to more than 422 million shares in all.

Warren Buffett made three very important moves in his portfolio during 2011, and Wells Fargo was one of them, along with Bank of America and IBM purchases. He provides shell holders several different reasons why this was important during his annual letter: “the banking industry is back on its feet, and Wells Fargo is prospering. Its earnings are strong, its assets solid and its capital at record levels.”

Wells Fargo is also extremely large – since it currently serves about one out of every three households in the United States of America from its 12,000 ATMs, it’s 9000 branches and their website. They are also prominent in 35 different countries. This company is also the first in market value of its common stock out of all of the United States banks, and the fourth in assets.

Even though Warren Buffett requires a high ROI from a bank, he also insists that the return on investment be gained in a conservative manner. This is great, because Wells Fargo has a very well maintained and controlled operating environment. It has excellent ground rules in place to manage credit risk, and they monitor their loan portfolio performance very closely. It also has set ranges for its interest rates and market risks in its liabilities and assets, while it is able to fuel growth with ample capital levels and liquidity.

In addition, Wells Fargo will continue to remove nonperforming loans from its assets. During the third quarter of 2012, loans that were 90 days past due or more totaled in the amount of $1.5 billion. This is down a half $1 billion from the $2 billion at the end of 2011.

Book Review: 'The Warren Buffett Portfolio'

Books on Warren Buffett dominate the bookshelves at the investment section of bookstores. Among the sea of Warren Buffett books, Robert G. Hagstrom's name stands out. He has written three books: "The Warren Buffett Way," "The Warren Buffett Portfolio" and "The Essential Buffett."

According to Hagstrom, his second book, "The Warren Buffett Portfolio," is meant to be a companion, not a sequel, to "The Warren Buffett Way." He claimed he unwittingly passed lightly over two important areas: portfolio management and intellectual fortitude in The Warren Buffett Way. TheWarren Buffett Way gives the reader tools to pick common stocks wisely, and The Warren Buffett Portfolio shows you how to organize them into a focus portfolio and provides the intellectual framework for managing it.

I introduce readers to Hagstrom's second book The Warren Buffett Portfolio.

Takeaways from The Warren Buffett Portfolio

- Focus Investing: Choose a few stocks that are likely to produce above-average returns over the long haul, concentrate the bulk of your investments in those stocks and have the fortitude to hold steady during any short-term market gyrations.

- Phil Fisher was known for his focus portfolios; he always said he preferred owning a small number of outstanding companies that he understood well to owning a large number of average ones, many of which he understood poorly.

- Using the tenets of the Warren Buffett Way, choose a few (10 to 15) outstanding companies that have achieved above-average returns in the past and that you believe have a high probability of continuing their past strong performance into the future. Allocate your investment funds proportionately, placing the biggest bets on the highest-probability events. As long as things don't deteriorate, leave the portfolio largely intact for at least five years (longer is better), and teach yourself to ride through the bumps of price volatility with equanimity.

- Buffett has a different definition of risk: the possibility of harm or injury. And that is a factor of the "intrinsic value risk" of the business, not the price behavior of the stock. The real risk, Buffett says, is whether after-tax returns from an investment "will give him [an investor] at least as much purchasing power as he had to begin with, plus a modest rate of interest on that initial stake."

- The optimal portfolio is a focus portfolio that stresses big bets on high-probability events, as opposed to equally weighted bets on a mixed bag of probabilities.

- Measure management this way: 1) Review annual reports from a few years back, paying special attention to what management said then about strategies for the future. 2) Compare those plans to today's results: How fully were they realized? 3) Compare the strategies of a few years ago to this year's strategies and ideas: How has the thinking changed? 4) Compare the annual reports of the company you are interested in with reports from similar companies in the same industry. It is not always easy to find exact duplicates, but even relative performance comparison can yield insights.

- Stock prices disengage from the intrinsic value of a business for various reasons, including psychological overreaction as well as economic misjudgment. Focus investors are perfectly positioned to take advantage of this mispricing. But, to the degree they incorporate macroeconomic or stock market predictions inside their model, focus investors will diminish their competitive advantage.

- For Buffett, investing is a series of "business" pitches and, to achieve above-average performance, he must wait until a business comes across the strike zone in the "best" cell. Buffett believes investors too often swing at bad pitches, and their performance suffers. Perhaps it is not that investors are unable to recognize a good pitch — a good business — when they see one; maybe the difficulty lies in the fact that investors can't resist swinging the bat.

From gurufocus.com

Related Books

The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy

The Warren Buffett Stock Portfolio: Warren Buffett Stock Picks: Why and When He Is Investing in Them

3 Big, Safe Dividend Stocks for the Beginning Investor

Whether you're new to investing or have been at it for a lifetime, you need to understand the business models of the companies you invest in, because understanding how a company makes money will significantly reduce your overall investing risk.

In that spirit, today we'll look at three companies with straightforward business models, strong dividends, and a knack for longevity. Because what good is a great dividend if the company's not going to be around long enough to pay it out?

Without further ado, then, here are three big, safe dividend stocks for the beginning investor, along with the reasons for my personal favorite at the end:

1. Boeing (NYSE: BA  )
727. 737. 747. 787. At first glance, they're just numbers, but upon reflection they're so much more. You've heard them uttered or read about them your whole life. They represent what Boeing is all about: airliners. Boeing is the most successful company in the history of aviation, and indeed is the very essence of American aviation. This is a company that has endured its share of economic ups and downs, just like any other big company that's been around for nearly 100 years, but is still at the top of its game.

From a dividend investor's perspective:

• I normally look for dividend yields of around 3% -- an arbitrary threshold, but one I feel separates the wheat from the chaff. Boeing pays 2.5% -- under our threshold, but close enough to enjoy consideration as one of our dividend stocks, especially given what a rock-solid industrial giant it is.
• I like to see dividend-payout ratios of 50% or less: As a rule of thumb, the lower the percentage, the more sustainable it is. At 30%, Boeing's falls well below our 50% mark, which argues well for its longevity.

Boeing's five-year average dividend yield is 2.7%, which bodes well for the longevity of the current 2.5%. But most critically, the orders for aircraft just keep coming, with airlines around the world placing orders in record numbers. On Sept. 6, the company reached a milestone: order No. 500 for its next-generation 737 aircraft, the workhorse of the fleet in airlines everywhere.

2. Johnson & Johnson (NYSE: JNJ  )
Johnson's Baby Shampoo. Tylenol. Band-Aid. Listerine. Brands that are burned into your memory from childhood, and likely still have a significant presence in your life. J&J has been around since 1886, and just like Boeing, has seen its share of ups and downs, including an embarrassing string of product recalls lately. But the company has a new CEO, Alex Gorsky, who is tasked with turning the company around with a strategy focusing on the rehabilitation of the consumer-products division. Given J&J's stable of iconic brands, it's a good one.

From a dividend investor's perspective:

• I said I look for a 3% yield on our dividend stocks. At 3.6%, J&J easily makes the grade, as does, to its credit, rival Pfizer (NYSE: PFE  ) , which pays out an identical 3.6%.
• At 74%, J&J's payout ratio is steeper than I like, but not frighteningly so. Pfizer comes in at a better, but not game-changing, 62% on this metric.

J&J has a five-year average dividend yield of 3.1%, which argues fairly well for the sustainability of the current 3.6%. While having a rough go of it right now, this company will be rehabilitated. In the end, J&J has too much brand strength and too much money in the bank -- $16.9 billion -- to go away anytime soon. And its wide-ranging consumer and medical-professional product lines make it a safer bet in the long run than strictly pharmaceutical-focused Pfizer.

Buffett Has Success with Walmart

By Swagato Chakravorty

Monday, July 23rd, 2012

The Oracle is at it again.

Back in 2009, Warren Buffett bought 17,892,342 shares of Walmart (NYSE: WMT) stock at around $50 per share. That was in the third quarter.

In the fourth, he bought another 1,200,500 for around $52.50. Finally, he bought 7,671,000 shares for $61 in early 2012, almost precisely before Walmart stock jumped to $72.31.

This year alone, Walmart’s stock has risen by 21 percent so far, making Buffett look, as usual, eerily prescient.

Walmart has done fairly well, increasing revenue each year over the past ten years to hit $447 billion in the fiscal year 2012. Every year since 1974, Walmart has increased its dividend, and this year is no different—the board increased it to $1.59 per share.

According to Nasdaq, GuruFocus had estimated Walmart’s value in 2011 to be $78, with an assumption of 10 percent EPS growth and 3 percent terminal growth over the coming decade.

Currently, Walmart is trading at slightly over $71.

Along with Walmart’s return to market prominence, Berkshire Hathaway’s (NYSE: BRK.A) stocks have steadily risen by more than 10 percent this year. Each stock now costs $125,321, and that represents a record high in 16 months.

As recently as May 4, Berkshire stated that its net revenues were at $3.2 billion, which makes this a third straight year of such increases. Plus, operating earnings were $2.7 billion, a great improvement over last year’s equivalent-period earnings of $1.6 billion.

Berkshire benefits from Buffett’s visionary guidance. The man has repeatedly shown confidence in America and the American market.

Speaking to CNBC, he expressed his belief in a resurgence within the housing market, as well as indications that investors are seeking safer ground as the American economy continues to shrink for the present.

From wealthdaily.com

A Diversified Approach To International Dividends

Any investor that understands the merits of asset allocation also understands the importance of including an international allocation in their portfolio. The concept is that in "normal" times there is always a market somewhere in the world rallying. To meet my set international allocation, I have focused on the following areas within my portfolio:

I. International Fund in my 401(k)

My 401(k) offers an international equity fund. This fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the MSCI EAFE Index. The Fund will typically attempt to invest in the securities comprising the Index in the same proportions as they are represented in the Index. When compared to other options in my 401(k), this fund has slightly under-performed. 10-Year Return: 4.0%

II. International Exchange Traded Funds (ETF)

I hold several ETFs with a large international exposure. Many of these are held in my High-Yield portfolio, where a higher than normal level of volatility is expected. Below are several funds that I currently hold with international exposure of 50% or more:

- WisdomTree Emerging Markets Income (DEM) | 100% International | Yield: 4.5%

- EV Dividend Income Fund (ETG) | 51% International | Yield: 9.3%

- Clough Global Equity (GLQ) | 50% International | Yield: 9.6%

- Nuveen Global Value Opportunity (JGV) | 63% International | Yield: 9.0%

III. Individual International Dividend Stocks

It was my desire to have international representation within my income investments, so I first looked to identify good non-U.S. dividend individual stocks that had an ADR trading on a U.S. stock exchange. To identify these stocks I used the International Dividend Achievers™ list. 

To become eligible for inclusion, a company must be incorporated outside of the United States. The companies must be have an American Depository Receipt or common stock trading on NYSE, NASDAQ or AMEX. Companies must have paid increasing regular annual dividends for five or more consecutive years. What I found is that most companies outside the U.S. follow a different dividend model. Here are some of the differences:

- Many Foreign Companies Pay Dividends Based on a Percent of Earnings

This produces a very erratic cash stream. Consider GlaxoSmithKline Plc(GSK). Its ADR paid $0.543 in Nov/11, $0.821 in Feb/12 and $0.549 in May/12.

- Many Foreign Companies Only Pay Dividends Annually

I need more feedback than this. I would hate to wait a full year before learning a company plans to slash its dividend. Examples of annual dividends includeStatoil ASA (STO), Siemens AG (SI) and Sanofi-Aventis SA (SNY).

- Most Foreign Companies Pay Dividends in Their Local Currency

Most Canadian companies pay quarterly consistent dividends, similar to companies in the U.S. However, they pay the dividends in Canadian dollars, so the currency risk is with the U.S. investor. 

There is probably much less fluctuation between the U.S. and Canadian dollars than most other currencies. However, it exists. Consider the last five dividends on Canadian National Railway Company (CNI): Apr/11 $0.334, Jul/11 $0.336, Oct/08 $0.311, Jan/12 $0.318 and Apr/12 $0.375. In Canadian dollars, the dividend was $0.325 for the first three periods, then increased to $0.375 in the last two periods.

IV. U.S. Based Stocks With Significant International Exposure

One way to gain international expose without any of the problems listed above, is to hold blue-chip, U.S. based corporations with large foreign operations. These multinationals pay quarterly dividends and generally assume the currency risk. Below are several large companies that derive more than 50% of their revenue outside the U.S.: 

  

Colgate-Palmolive Company (CL) is a major consumer products company markets oral, personal and household care and pet nutrition products in more than 200 countries and territories.

79.4% 2011 Foreign Sales | Yield: 2.4%

McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world, with about 33,500 restaurants in 119 countries.

68.4% 2011 Foreign Sales | Yield: 3.2%

Abbott Laboratories (ABT) is a diversified life science company that is planning to split into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals.

58.8% 2011 Foreign Sales | Yield: 3.2%

Johnson & Johnson ( JNJ) is a leader in the pharmaceutical, medical device and consumer products industries.

55.5% 2011 Foreign Sales | Yield: 3.6%

PepsiCo, Inc. (PEP) is a major international producer of branded beverage and snack food products. 50.2% 2011 Foreign Sales | Yield: 3.0%

Conclusion

In the past, I had concluded that income investing and international securities didn't mix very well for all the reasons listed above. My plan was to focus on U.S. equities for my dividend income portfolio and use my 401(k) to ensure an adequate international allocation.

Going forward, I will still use my 401(k) for the majority of my international allocation. However, as I find funds with international holdings that pay a stable/growing dividend, I will include them in one of my income portfolios. Also, I plan to add a few more international stocks, but will limit my holdings due to the instability of their dividends.

I am always looking for ways to improve my portfolio, without significantly increasing the risk. 

From dividend-growth-stocks.com

7 Dividend Stocks For A Confident And Secure Future

Are you confident and secure in your investing process? It is my firm belief that most investors will lose money in the stock market over their lifetime. It is not that the market is a bad place to invest your money, but left unchecked the psychology of the market will lead you to do just the opposite of what you should to be doing.

The great investors know this. Consider Warren Buffett's famous quote, 'We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful'. How do we overcome our natural instincts to sell when we should be buying?

Confidence

First, we must follow a process we are 100% confident in. Doubt is the gateway to destructive behavior. Many approaches have proven successful over time. I have chosen income investing, primarily through individual Dividend Growth Stocks. How do we become so confident in a process that we are willing to trust our life's savings to as the world crumbles around us?

Experience

Confidence comes from knowledge and experience. We must study our approach and understand the process. It is easy for me to watch stock prices crater knowing that it is not only providing an excellent entry point for future capital appreciation, but also higher current yields that will grow each year as the companies continue to raise their dividends. Knowing how it works is good, but comfort in the process comes from having been there before and experiencing the gains after coming out of a downturn.

Quality

Finally, the most important step is selecting great investments. For me, those are good solid dividend companies that have a proven track record of increasing their dividends and the financial ability to continue doing so in the future. 

Below are seven companies that are leaders in their industry and have increased dividends for more than 30 consecutive years for your consideration:

Lowe's Companies, Inc. (LOW) sells retail building materials and supplies, lumber, hardware and appliances through more than 1,700 stores in the U.S. and Canada. The company has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 50 consecutive years. Yield: 2.3%

Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America,Wal-Mart operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 38 consecutive years. Yield: 2.3%

Cash Just May Be Your Riskiest Investment

Quantitative easing (QE), it is such a benign sounding term. It is somewhat relaxing rolling off your lips. Unfortunately, this rose has thorns. QE in simple terms is the government printing money and buying financial assets (e.g. bonds, etc.) in an effort to stimulate the economy. A side effect of QE is higher prices of the financial assets bought, which in turn lowers their yield.

Stocks surged last Wednesday in anticipation that the Federal Reserve is considering a new economic stimulus in the form of quantitative easing. In addition to another round of QE (QE3?), some investors are speculating that the Fed could extend its program of swapping short-term bonds for long-term bonds in an effort to to hold down yields on 10-year and 30-year bonds.

Lower yields on debt instruments is not the only side effect of QE. Another and more serious side effect is the devaluation of our currency. Printing fake money to solve real problems has never succeed. Germany, Yugoslavia, and many others, have provided textbook examples of the futility of such an exercise - it always ends in a financial disaster!

If the the U.S. Government is monetizing the debt, the dollar will continue to fall against strong currencies and assets with real intrinsic value such as commodities. Two things you don't want to be holding when the government starts printing money are:

1. Debt (someone owing you)

2. Cash

As more dollars are created, the the ones already in circulation are worth less, and if you hold debt, you will be paid back with devalued dollars. As a side note, it is to your advantage to owe cash since you will be the one paying it back with dollars that are worth less. So what can you do?

If you believe it is just a bump in the road, then a more focused concentration on quality multinationals such as these may be the best solution:

The Coca-Cola Company (KO) | Yield: 2.7%

The Coca-Cola Company is the world's largest soft drink company with a sizable fruit juice business. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 50 consecutive years. 

McDonald's Corporation (MCD) | Yield: 3.2%

McDonald's Corporation is the largest fast-food restaurant company in the world, with about 33,500 restaurants in 119 countries. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 36 consecutive years. 

Abbott Laboratories (ABT) | Yield: 3.3%

Abbott Laboratories is a diversified life science company that is planning to split into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 40 consecutive years. 

Johnson & Johnson (JNJ) | Yield: 3.4%

Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 50 consecutive years. 

The Procter & Gamble Company (PG) | Yield: 3.6%

The Procter & Gamble Company is a leading consumer products company that markets household and personal care products in more than 180 countries. The company has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 55 consecutive years. 

Dell Inc. (DELL) Announces First Quarterly Dividend

Dell announced late Tuesday that it was joining the growing ranks of tech companies that pay a dividend. Microsoft (MSFT), Intel(INTC), Oracle (ORCL) and Cisco (CSCO) all pay quarterly dividends, and Apple (AAPL) announced earlier this year it will join the group.

Dell has adopted a dividend policy under which the company intends to pay quarterly cash dividends on its common stock beginning in the third quarter of the current fiscal year. Dell expects the initial dividend rate to be $0.32 per share per year, or $0.08 per share quarterly. Based on Monday’s closing price of $11.86 for Dell stock, the stock would yield 2.7%. 

Dell's CFO, Brian Gladden, stated:

Our efforts to streamline our operations and shift the mix of our business over the past several years have resulted in sustainably strong cash flow from operations, enabling us to increase the percentage of capital we’ve allocated to research and development, capital expenditures and acquisitions while maintaining an ongoing share repurchase program. The payment of a quarterly cash dividend to Dell’s shareholders adds another element to our disciplined capital allocation strategy.

As with other tech. companies that have initiated a dividend program, I will take a wait and see approach before considering buying the stock. It is important to determine if the company will develop a "dividend culture", or if they are just going through the motions. 

From dividend-growth-stocks.com

The Most Successful Dividend Investors of all time

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

I did some research and uncovered several successful dividend investors, whose stories provide reassurance that the traits of successful dividend investing I outlined in a previous post are indeed accurate.

The first investor is Anne Scheiber, who turned a $5,000 investment in 1944 into $22 million by the time of her death at the age of 101 in 1995. Anne Scheiber worked as an IRS auditor for 23 years, never earning more than $3150/year. The one important lesson she learned auditing tax returns was that the surest way to become rich in America is by accumulating stocks. She accumulated stocks in brand name companies she understood and then reinvested dividends for decades. She never sold, in order to avoid paying taxes and commissions. She also never sold even during the 1972-1974 bear market as well as the 1987 market crash because she had high conviction in her stocks picks. She also held a diversified portfolio of almost 100 individual securities in brand names such as Coca-Cola (KO), PepsiCo (PEP), Bristol-Myers (BMY), Schering Plough (acquired by Pfizer in 2009). She read annual reports with the same inquisitive mind she audited tax returns during her tenure at the IRS and also attended annual shareholders meetings. Anne Scheiber did her own research on stocks, and was focusing her attention on strong franchises which have the opportunity to increase earnings and pay higher dividends over time.

In her later years she reinvested her dividends into tax free municipal bonds, which is why her portfolio had a 30% allocation to fixed income at the time of her death. At the time of her death, her portfolio was throwing off $750,000 in dividend and interest income annually. She donated her whole fortune to Yeshiva University, even though she never attended it herself.

The second investor is Grace Groner, who turned a small $180 investment in 1935 into $7 million by the time of her death in 2010. Ms Groner, who worked as a secretary at Abbott Laboratories for 43 years invested $180 in 3 shares of Abbott Laboratories (ABT) in 1935. She then simply reinvested the dividends for the next 75 years. She never sold, but just held on to her shares.

She was frugal, having grown up in the depression era, and was the classical millionaire next door type of person who was not interested in keeping up with the Joneses. Grace Groner left her entire fortune to her Alma Mater. Her $7 million donation is generating approximately $250,000 in annual dividend income.

Marc Faber : Warren Buffett was Right about Gold

Although he has long disagreed with Warren Buffett, Marc Faber conceded in an interview that Buffett’s view of gold is basically correct, and that there are certain disadvantages to holding gold.

Marc Faber : “Well, you see, I’m an advocate of investments that generate free cash flow. In other words, you invest in something and every year you get, after all expenditures, some money in the form of interest payments or in the form of dividends.

And that allows you a lot of flexibility because if you have all your money in physical gold or in exploration companies the problem is you have no cash flow.

So if let’s say your portfolio drops by 50 percent, you don’t have any money to add to your positions, whereas if you have cash flow, every year some money comes in and you have purchasing power to buy the assets that during that year fell the most or where you think some value is emerging. And I think it is very important to have always cash flow to invest in opportunities. And so I also advocate essentially a diversification.

You know, a few weeks ago Mr. Buffett came out and said that gold is unattractive and so forth and several studies will show that stocks over the long run have performed better than gold. I fully agree with this study. It should be clear that the company that generates and pays out dividends over time will perform better than a dead asset like gold.

However — and this is a big “However” — I once talked to Jeremy Siegel, he’s written many books about the performance of stocks, in 1800 and so forth. I [said], Jeremy, you start your book on the performance at 1800, are you actually aware that by 1841, the poor man’s recession, most of the canal companies and most of the banks were bankrupt.

So if you invested your money in 1800, by 1841 most of it was gone. And this is the point, in equities you have to rebalance your portfolio and in gold you don’t have to do that. It’s a totally different type of asset. You can’t compare it. And the other day, you know, Kodak went bankrupt. I remember in ’72 and ’73 among the 10 most popular stocks among institutions you had Polaroid and Eastman Kodak and both went bust over time and they were disastrous investments.

So it’s nice to say the market is going up in the long run by this and that, that I agree, but you have to rebalance the portfolio. And in gold you don’t have to do that. Gold is basically cash that doesn’t pay any interest.”

From warrenbuffettnews.com

Related Books

Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future

Gold Bubble: Profiting From Gold's Impending Collapse

The Golden Revolution: How to Prepare for the Coming Global Gold Standard

5 Reliable Dividend Payers Boosting Payouts

Dividends still make quite a bit of sense in today’s market. The currently low interest rate environment makes most bonds work only for capital preservation rather than real capital growth. On the other side, while there are certainly some solid growth stocks around, I don’t think there are too many expectations out there about a broadly sustained bull market of growth anytime soon.

A workable solution continues to be shareholder friendly companies. Businesses that can grow sales volume of their products or services modestly year by year, can maintain or increase pricing power on that volume (due to an economic moat or some privileged position), have reasonable valuations, and return most of their free cash flows to shareholders as dividends (and share repurchases, with the remainder), are a solid medium-risk option for sustained income growth and long-term capital appreciation, in my view.

Here are five examples of solid dividend payers that recently increased dividends at a substantial rate.

Exxon Mobil (XOM)

At only 2.78%, XOM doesn’t boast the highest yield around, but much of that is due to its higher stock valuation than its oil peers. The good news, however, is that XOM recently increased their quarterly dividend payout by a whopping 21%.

Being a leading company in a cyclical business, Exxon Mobil maintains an excellent balance sheet with total debt/equity of only 10% and an extremely high interest coverage ratio. Free cash flow is only moderately strong, due to the immense capital expenditures required to operate in this industry. But with large scale and efficiency ratios that are top notch, XOM is approaching three decades of consistent annual dividend growth.

Full XOM Analysis

Chevron Corporation (CVX)

Chevron has a larger dividend yield than XOM, at 3.64%. Although XOM and CVX have similar dividend payout ratios from earnings, since XOM has the higher valuation, Chevron has the higher yield.

Chevron’s recent increase was a solid 11%, but they already had a mild dividend increase in the midst of the year. So the dividend increase compared to the same quarter last year is over 15%.

The company has an even stronger tie to oil than its peers, as it has focused on deep sea drilling. Still, the company also does have natural gas investments, including at the Marcellus shale. The company maintains a meticulous balance sheet, with total debt/equity at only around 7%, an extremely high interest coverage ratio, and very little goodwill. The company has nearly tripled the book value of the shares over the past 7 years.

Full CVX Analysis

Fast-food dividend stock fight: McDonald’s vs. Tim Hortons

You can debate all you want about who has the better coffee or breakfast sandwich – McDonald’s (MCD-N90.11-0.79-0.87%)or Tim Hortons (THI-T54.35-0.80-1.45%). But today we’re tackling a more pressing question: Which fast-food chain has the more appetizing stock?

Certainly, Tims and Mickey D’s have plenty of things in common. Both companies pay dividends. Both have a track record of raising their dividends. And, unless consumers develop a sudden preference for tofu and Brussels sprouts, both will be hiking their dividends for years to come.

What’s more, because they sell inexpensive food, both companies should hold up relatively well even if the economy goes into the deep fryer.

But there are also some key differences that investors need to consider before they fork over their cash. Let’s see how the two stocks stack up on a range of measures.

Dividend history

Since declaring its first dividend in 1976, McDonald’s has increased its payment for 35 consecutive years. Just as customers know what to expect when they order a Big Mac, investors know they’ll get a dividend increase from McDonald’s every September. Tim Hortons has only been paying dividends since 2006, when it went public, although it, too, raises its dividend annually.Advantage: McDonald’s

Dividend growth

McDonald’s dividend has increased at a compound annual rate of 15 per cent over the past five years. That’s good, but not as good as Tim Hortons, which has raised its dividend by about 22 per cent annually over the same period. Tim Hortons may also have more capacity for future dividend growth, given that its payout ratio was a conservative 29 per cent of earnings in 2011, compared with 48 per cent for McDonald’s.Advantage: Tim Hortons

Dividend yield

No contest here. McDonald’s yields 3.1 per cent, which is more than double Tim Hortons’ yield of 1.5 per cent. So, although Tims is growing its divvy at a faster rate, if you’re looking for current income, the Golden Arches is your best bet. Advantage: McDonald’s.

Currency

For Canadian investors, owning a U.S. stock introduces volatility in the form of currency fluctuations. Exchange rates can work for you, or against you, but if you stick to Canadian stocks (or hedge your U.S. positions), you won’t have the extra volatility to worry about. Advantage: Tim Hortons.

Earnings growth

Based on analyst estimates compiled by Globeinvestor.com, McDonald’s earnings per share are expected to grow at a compound annual rate of about 9.1 per cent over the next two years. As impressive as that is, Tims’ earnings are expected to grow at an even faster 13.4 per cent.Advantage: Tim Hortons.

Brand strength

Tim Hortons is a powerhouse in Canada, where the coffee and doughnut chain is part of the cultural fabric. But outside of our borders it doesn’t have nearly the same resonance, as evidenced by its cautious U.S. expansion. McDonald’s, on the other hand, is a formidable global brand operating in 119 countries. In fact, it now generates more revenue from Europe than from North America, and income from Asia-Pacific, Middle East and Africa has doubled over the past six years. Advantage: McDonald’s.

Valuation

McDonald’s was the top-performing stock on the Dow Jones industrial average in 2011. But the shares are down more than 10 per cent from their 52-week high, hurt by April same-store sales growth that was slightly weaker than expected. Mickey D’s now trades at a reasonable multiple of about 16 times estimated 2012 earnings and 14.5 times 2013 estimates. Tim Hortons shares are up more than 11 per cent this year, and trade at a significantly higher multiple of 20 times 2012 estimated earnings and 18 times 2013 estimates. The rich P/E makes the shares vulnerable to a selloff if results disappoint. Advantage: McDonald’s.

The verdict

McDonald’s and Tim Hortons are both excellent fast-food operators that will likely reward shareholders with solid long-term total returns, both from capital gains and growing dividends. However, McDonald’s juicier current yield, more attractive valuation and proven global expansion record give it the edge in Yield Hog’s books. Disclosure: I eat far too frequently at both chains, own McDonald’s shares and would consider purchasing Tim Hortons if it dropped below $50.

From theglobeandmail.com

Wealth is a Journey, Dividend Stocks Can Take You There

Fad diets and fad investing plans rarely work. They are primarily designed to separate you from your money and make the seller wealthy. Real wealth is built with sweat equity and a sound financial plan. For most people fortunate enough to be born in the U.S., or any other industrialized country, they have access to the two main ingredients to achieve financial success: 1. Opportunity and 2. Time. 

Unfortunately, very few people are able to take advantage of the situation enough to even build a secure retirement. The formula to building wealth is rather simple - spend less than you earn and invest the difference. Implementation is where many people come up short. With the right focus and some positive feedback, building wealth can be much easier than shedding the spare tire around your mid-section. Here's how to do it...

Have A Plan

Many people are putting money into various retirement vehicles, but they haven’t taken the time to envision how it is all going to come together and ultimately if it will be enough. We often will spend enormous amounts of time planning every detail of our vacation, but I have no idea what our estimated income or expenses will be when we retire. 

As the old adage goes, ‘Everyone has a plan – failing to plan is planning to fail.’ Retirement planning does not have to be complicated, but not doing it will complicate your retirement. To help you start the planning process, take a look these FREE retirement calculators (Retirement-Calculator.xls [Excel] or Retirement-Calculator.ods [Libre/Open Office]).

Use Time To Your Advantage

Time is your most valuable wealth building asset. Everyone is born with it. Few realize its importance until they lose most of it. The asset is so valuable it can’t be bought. As a value/dividend investor, I have learned that time can cure many mistakes and provide enormous investment leverage.

When you are young time is your friend. It allows to recover from mistakes. It educates you and provides you with valuable experiences. However, time is a double-edged sword that can also work against you. It is easy to say, 'I will start investing tomorrow - I have plenty of time.' Time can also create a false sense of urgency -' I held this stock for over a year and its price has gone nowhere.' Use time to your advantage start young and be patient.

Dividend Stocks To Help Grow Your Wealth

A long-term buy-and-hold investing approach focusing on quality dividend growth stocks has provided the means for many investors to enjoy a comfortable retirement. If you start early enough, you will go beyond a comfortable retirement into the realm of building long-term wealth. For starters, you might consider these dividend stocks that have been rewarding their investors with growing dividends for 40 or more consecutive years, all with a yield greater than 3%:

PepsiCo, Inc. (PEP) is a major international producer of branded beverage and snack food products. PEP is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 40 consecutive years. Yield: 3.2%

What High Dividend Yield Stock Has to Offer

High Dividend Yield Stock Characteristic
Why Most Fund Managers Prefer This Stock

Summarized Overview

In this article, you'll find information about how high dividend stocks had performed and why high they are so attractive and favored by many investors.

You'll also find information on what you can expect and some precaution when dealing with this type of stocks.

How High Dividend Stock Had Performed


High dividend yield stock is often viewed as a boring pick. It offers low price volatility and charged at premium price compared to penny stocks. To tell you the truth, you won't get-rich-quick with these stocks.

But most, earnings are expected to grow between 10 per cent and 15 per cent annually over the next five to ten years.

So, over time, you can expect their share prices to move up at about the same rate.

Combining the expected price appreciation (though no guarantee) with two to five per cent dividend yields, you can expect annual returns in the 12 to 20 per cent range, or roughly at 16 per cent. To put that in perspective, at a 16 per cent compounded annual return, $1,000 turns into $4,411 in just ten years!

And that is not even considering if you invest back your dividends!

Let see what make this stocks sounds so good.

Why High Dividend Stock is so Attractive

Consistent and Generous Dividend Policy.
How often a company pays dividends to its shareholders can be used to gauge the health and profitability of the company.

Has Effective and Committed Management Team.
They are so effective that even if the company is a traditional one and in the maturing stage of its business lifecycle, they are still able to grow. They make themselves relevant all the time by keeping up to date or even ahead of its competitors with their agility, creativity and innovation.

Look around and compare yourself, from who the brains are behind blue chip companies to who are responsible for struggling and dying businesses. You can easily discover the distinction in their attitudes and mindsets.

The management team is the one that determines the financial health, proficiency, competitiveness and resilience of a company. The company’s survival is dependent on how capable the management is in manoeuvring around obstacles and challenges. Well managed companies not only will emerge safe and sound from crisis, but also able to expand their presence and dominance too.

Five Essential Metrics For Dividend Hunters

For investors that want regular returns from their investments, a well researched dividend stock strategy could be an ideal solution. Yet, in a market where headlines are dominated by glamorous growth stock stories – with plenty of upside but no immediate income – knowing how and where to look for the best and most reliable yielding shares presents its own set of challenges. 

Buying stocks that pay regular dividends is an investment approach that’s as old as the market – but current low interest rates and depressed bond yields are making it an increasingly attractive prospect for some. In tandem, dividend payouts from UK listed corporates continues to grow. In the first quarter of 2012 companies increasing payouts outnumbered those cutting by 3.8:1 – but that was down slightly on the 4.1:1 for 2011 overall. 

That said, individual investors are frequently divided on whether the most profitable returns are achieved from dividend stocks or capital growth. Indeed, with average stock holding periods among private stock pickers estimated to be around eight months, it is clear that, at least in part, many investing strategies are more concerned with value gain than long term dividend returns. In a sense this appears counterintuitive to some market stats. Two years ago, James Montier at US investment firm GMO, wrote a paper insisting that: “…to those with an attention span measured in longer than milliseconds – who are few and far between, to judge from today’s markets – dividends are a vital element of return.” He claimed that, looking at the US market since 1871, on a one-year time horizon, nearly 80 percent of the return has been generated by fluctuations in valuation. However, over five years, dividend yield and dividend growth account for almost 80 percent of the return. 

For dividend virgins, here are some of the basic metrics (and their potential pitfalls) that are required when weighing the investment case for a yielding stock. 

1. Dividend Yield

In simple terms, the dividend yield measures how much a company has paid out in dividends over the past year relative to its share price (historic annual dividend per share divided by the current share price as a percentage). A forecast yield can also be established by using consensus estimates from analysts. 

High yields are obviously a head-turner for dividend hunters and they tend to be dominated by some of the largest and most prestigious companies in the market – the top three are currently Man Group, Resolution and Aviva. Indeed, the Dividend Dogs of the FTSE stock selection screen has delivered strong returns simply by trawling the market for the top ten yielders and then chopping and changing them once a year. 

A word of warning however is that high dividend yields can also be a sign that a stock is underpriced or in trouble and that future dividends could be cut. Likewise, a low dividend yield could signal that a stock is overpriced or that future dividends may be higher. 

So, on yield alone, investors are exposed to the vagaries of the market and the occasional disasters that befall companies and sectors. For instance, back in September 2008 Lloyds Banking Group was boasting a head-turning yield of around 8 percent. Investment commentators were amusing themselves over the fact that the banking giant’s shares offered a stronger return than a Lloyds TSB internet saver account. However, the banking collapse that ensued was immediately felt Lloyds’ investors – and those dividend payments still haven’t been properly restarted. 

5 Higher-Yielding, Income Growing Tech Stocks

When you hear the names Cisco (CSCO), Oracle (ORCL), Apple (AAPL), Microsoft (MSFT) and Intel (INTC), "dividend stocks" is probably not the first thought to enter your mind. It wasn't that long ago that tech companies simply didn't pay dividends. Every penny earned was plowed back into the business. The entire focus was on growth, and investors were looking for capital gains.

Long-considered the domain of momentum or growth investors, many tech stocks have matured and begun paying a reasonable dividend. Granted, the tech sector hasn't garnered the same following from income investors as traditional higher-yielding sectors such as consumer defensive, healthcare and financial services. However, there are several valid tech options to consider that will pay us a growing income stream while diversifying our portfolios.

This week week, I screened my dividend growth stocks database for Technology companies with a yield at or above 2.5% and that have increased their dividends for at least 9 consecutive years. The results are presented below:

Microsoft Corporation (MSFT) the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 9 consecutive years. Yield: 2.7%

Intel Corporation (INTC) is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products. The company has paid a cash dividend to shareholders every year since 1992 and has increased its dividend payments for 9 consecutive years. Yield: 3.2%

9 Stocks Compounding Income With Higher Dividends

When evaluating a company as a potential income investment I look at its calculated fair value, ability to generate cash, debt position and the net present value of its dividend stream compared to alternative “safe” investments. The advantages dividend stocks have over "safe" investments are potential capital appreciation and dividend growth. Not only are your earnings compounding, but the rate of earnings is growing.

Below are several companies compounding their shareholders income with increased cash dividends:

Newell Rubbermaid Inc. (NWL) designs, manufactures, and markets consumer and commercial products. May 10th the company increased its quarterly dividend 25% to $0.10 per share. The dividend is payable June 15, 2012 to common stockholders of record at the close of business on May 31, 2012. The yield based on the new payout is 2.2%.

Costco Wholesale Corporation (COST) operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. May 9th the company increased its quarterly 14.6% dividend to $0.275 per share. The quarterly dividend is payable June 8, 2012, to shareholders of record at the close of business on May 25, 2012. The yield based on the new payout is 1.3%.

Quaker Chemical Corporation (KWR) develops, produces, and markets various formulated chemical specialty products for heavy industrial and manufacturing applications worldwide. May 9th the company increased its quarterly dividend 2.1% to $0.245 per share. The dividend is payable on July 31, 2012, to shareholders of record at the close of business on July 17, The yield based on the new payout is 4.0%.

CSX Corporation (CSX) provides rail-based transportation services, providing traditional rail service and the transport of intermodal containers and trailers. May 9th the company increased its quarterly dividend 7% increase to $0.14 per share. The dividend is payable on June 15, 2012 to shareholders of record at the close of business on May 31, 2012. The yield based on the new payout is 4.0%.

LyondellBasell Industries N.V. (LYB) manufacturers and sells chemicals and polymers, refines crude oil, produces gasoline blending components, and develops and licenses technologies for the production of polymers. May 9th the company increased its quarterly dividend 60% to $0.40 per share. The dividend is payable on June 11, 2012 to shareholders of record as of May 21, 2012. The yield based on the new payout is 4.0%.

Hercules Technology Growth Capital, Inc. (HTGC) is a private equity, venture capital, and venture debt firm specializing in providing debt and equity to privately held venture capital and private equity backed companies and select publicly-traded companies. May 8th the firm increased its quarterly dividend 4% to $0.24 per share, an increase of 4.0%. The dividend is payable on May 25, 2012, to shareholders of record as of May 18, 2012. The yield based on the new payout is 8.4%.

Mine Safety Appliances Company (MSA) engages in the development, manufacture, and supply of products that protect people's health and safety in the fire service, homeland security, oil and gas, construction, and other industries. May 8th the company increased its quarterly dividend 8% to $0.28 per share. The dividend is payable June 10, 2012 to shareholders of record on May 21, 2012. The yield based on the new payout is 2.7%.

NV Energy, Inc. (NVE) engages in the generation, transmission, distribution, and sale of electric energy in Nevada. May 8th the company increased its quarterly dividend 31% to $0.17 per share. The dividend is payable June 20, 2012 to shareholders of record on June 5, 2012. The yield based on the new payout is 4.0%.

Intel Corporation (INTC) designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan. May 7th the company increased its quarterly dividend 7% to $0.225 cents per share. Today's announcement is the third dividend increase in the past 18 months. Intel's dividend has increased every year over the past decade. The yield based on the new payout is 3.2%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock.

From dividend-growth-stocks.com

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7 Higher-Yielding Consumer Stocks To Build Your Yield

An investment strategy based on Dividend Growth Stocks focuses on companies that produce predictable results and thus are able to consistently raise their dividends. Demand for household and personal care products is generally stable and not affected by changes in the economy or other factors. If you lose your job, you probably won’t stop bathing, washing your clothes, brushing your teeth or stop buying toilet paper. That's why companies in the Consumer Defensive sector are sought after as desirable dividend growth investments.

For many of these companies, raw material costs is a primary driver of profitability, and the larger more established companies are in a better position to negotiate better terms. Growth comes from a growing population and expanding into emerging markets where the people are starting to earn a wage they can not only life on, but begin to buy things we consider necessities.

The Consumer Defensive sector has been a steady performer over the years for both yield and growth. Given the relatively low price of most consumer goods, people often prefer to pay a few pennies more for a name brand that they are confident with. Investments in the Consumer Defensive sector brings yield stability and potential dividend growth to an income portfolio.

This week week, I screened my dividend growth stocks database for Consumer Defensive companies with a yield above 3.00% and that have increased their dividends for at least 8 consecutive years. The results are presented below:

General Mills, Inc. (GIS) is a major producer of packaged consumer food products, including Big G cereals and Betty Crocker desserts/baking mixes. The company has paid a cash dividend to shareholders every year since 1898 and has increased its dividend payments for 8 consecutive years. Yield: 3.2%

PepsiCo, Inc. (PEP) is a major international producer of branded beverage and snack food products. The company has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 40 consecutive years. Yield: 3.1%

The Procter & Gamble Company (PG) is a leading consumer products company the markets household and personal care products in more than 180 countries. The company has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 55 consecutive years. Yield: 3.5%

The Clorox Company (CLX) is a diversified producer of household cleaning, grocery and specialty food products is also a leading producer of natural personal care products.The company has paid a cash dividend to shareholders every year since 1968 and has increased its dividend payments for 36 consecutive years. Yield: 3.6%

Kimberly Clark Corp. (KMB) is a leading consumer products company's global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex and Scott. The company has paid a cash dividend to shareholders every year since 1935 and has increased its dividend payments for 16 consecutive years. Yield: 3.8%

The H.J. Heinz Company (HNZ) produces a wide variety of food products worldwide, primarily condiments, convenience meals and snacks. The company has paid a cash dividend to shareholders every year since 1911 and has increased its dividend payments for 8 consecutive years. Yield: 3.6%

Sysco Corporation (SYY) is a large distributor of food and related products, primarily to the foodservice or food-away-from-home industry. The company has paid a cash dividend to shareholders every year since 1970 and has increased its dividend payments for 41 consecutive years. Yield: 3.9%

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

From dividend-growth-stocks.com

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